US stocks rally after ISM reports economy boost

US stocks staged a broad rally that drove the S&P 500 to its best day in two months yesterday after manufacturing, consumer spending and construction data instilled confidence that the economic recovery is gaining traction.

Transport stocks had their best day in six months following an industry report that the US manufacturing sector grew in April at its fastest pace in almost six years and as UAL agreed to buy Continental Airlines to create the world's largest airline.

“All these numbers are good and continue to point to the economy doing very, very well,” said Stephen Massocca, managing director at Wedbush Morgan in San Francisco.

The Dow Jones industrial average rose 143.22 points, or 1.30 per cent, to 11,151.83. The Standard & Poor’s 500 Index gained 15.57 points, or 1.31 per cent, to 1,202.26. The Nasdaq Composite Index added 37.55 points, or 1.53 per cent, to 2,498.74.

The government reported an unexpected rise in construction spending in March, and consumer spending edged up for a sixth-straight month.

The report helped boost shares of industrial companies, including Caterpillar and Boeing, which closed up 2.7 per cent.